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From the Editor’s Desk...

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corporate and to help nurture ideas of budding entrepreneurs by providing a platform to them to showcase
their Ideas.

Editorial Team
Miti Vaidya
Siddhartha Saran

CRESCENT welcomes you all to the new issue of CREST. In this issue, we have
articles on diverse areas such as entrepreneurship, consulting and strategy.
Marketers have long been worried about what impact word-of-mouth marketing
has on their marketing campaigns and have long strived to create a metric to
measure the impacts of word-of-mouth marketing. In this issue we talk about
how marketers can finally decipher the science behind word-of-mouth marketing and harness its potential to realize higher returns on their marketing investments.
In this issue we also look at the link between innovation and harnessing the new
ideas into successful business ventures. We conclude with an article on the winning approach to change management and wrap up this issue with the news on
the latest in the consulting world.
The Editorial Team would love
crest.xlri@gmail.com. Happy Reading!

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CREST Feb 2011

ENTREPRENEURSHIP

Innovation and Entrepreneurship
Is innovation in businesses only the process of generating new ideas? What
about the profitable aspect of these new ideas with respect to business? And
if profitability of new business lines is what firms are looking for, is this not
simply entrepreneurship?
We look at a few example to get a taste of Innovation v/s Entrepreneurship.
One of the most popular Management Gurus of our time, Peter F. Drucker said
“Innovation is the specific instrument of entrepreneurship. The act that endows resources with a new capacity to create wealth.”
When firms across the world talk about using innovation to get ahead of competition, are they also considering alongside the importance of building an entrepreneurial spirit within their culture? Because, even though a firm may be
endowed with creative geniuses, developing those new ideas into profitable
business ventures is not possible without that atypical entrepreneurial streak.

“Innovation is
the specific instrument of entrepreneurship.
The act that endows resources
with a new capacity to create
wealth.”

There are some of course who take innovation seriously enough to build it into
their DNA. Everyone is familiar with the oft-quoted example of the information
giant, Google – specifically letting employees spend part of their time in pursuing their own interests, and then channelizing those employee efforts into the
mainstream business. Google of course takes on the inherent risk in this approach – once in a while an employee may come up with such a promising idea
that he chooses to pursue his entrepreneurial interest outside of the organization. However, more often than not, the kind of mentoring Google provides ensures that ideas get absorbed within and the employee’s entrepreneurial thirst
is quenched.
Then there are those firms who are specifically in the business of innovation.
An example is Bell Labs (currently under Alcatel-Lucent, previously under US
telecom giant AT&T). An entire operating segment is dedicated to developing
innovative solutions for clients – for them, Innovation is Business. Along similar lines is Deloitte Innovation. It started off in South Africa in an attempt to
increase growth in revenues for the parent firm, Deloitte Consulting. The success that it has been, Deloitte Innovation is now generating US$ 1 billion in
revenue and is a significant part of the worldwide Deloitte operations. As their
clients realize that one of the ways to tackle an uncertain future is through
new ideas, Deloitte Innovation is assisting by creating new lines of business in
existing enterprises. And we thought entrepreneurship was about starting
from scratch, or that consulting was merely about problem-solving!
On Indian shores, there are a few firms which are trying to fuel the innovation
hype of this century. The Marico Innovation Foundation specifically caters to
this area. Their aim is to foster innovative initiatives in India and they do this
through research, awards, learning modules, etc. The government too has an
official initiative in the form of National Innovation Foundation to support
grassroots innovation.

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Whatever be the vehicle, firms realize that in a cluttered market, only different
elements will stand out. And therefore, at least for this decade, strategists cannot afford to look at Innovation and Entrepreneurship separately – they must
somewhere go hand-in-hand.

CREST Feb 2011

COVER STORY- STRATEGY
A new way to measure word-of-mouth marketing
Consumers have always valued opinions expressed directly to them. Marketers may spend
millions of dollars on elaborately conceived advertising campaigns, yet often what often
makes up a consumer’s mind is quite simple: a word-of-mouth recommendation from a
trusted source. As consumers overwhelmed by product choices tune out the ever-growing
barrage of traditional marketing, word of mouth cuts through the noise quickly and effectively. In this article Siddhartha Saran reviews a novel method to measure the impact of
word-of-mouth marketing devised by McKinsey

“[…] factors
tend to make
people conduct
more research,
seek more opinions, and deliberate
longer
than they otherwise would.”

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Defining word of mouth
‘Word of mouth’ stands for consumer-to-consumer communication with no
economic incentives. The sender may, however, reap social gratification or rewards. Word of mouth is stated to be the primary factor behind 20 to 50 percent of all purchasing decisions. Its influence is greatest when consumers are
buying a product for the first time or when products are relatively expensive.
These factors tend to make people conduct more research, seek more opinions, and deliberate longer than they otherwise would. And its influence is
growing: the digital revolution has amplified and accelerated its reach. Product
reviews posted online, opinions disseminated through social networks, websites and blogs created by some customers and online social networks have led
marketers to recognize the growing importance of ‘word-of-mouth’ marketing.
This article explores how word of mouth can be dissected to understand exactly what makes it effective and how its impact can be measured using “wordof-mouth equity”—an index of a brand’s power to generate messages that influence the consumer’s decision to purchase.
Consumer purchase decision
Once consumers make a decision to buy a product, they start with an initial
consideration set of brands formed through product experience, recommendations, or awareness-building marketing. Those brands, and others, are actively
evaluated as consumers gather product information from a variety of sources
and decide which brand to purchase. Their post-sales experience then influences their next purchasing decision. Word of mouth has different degrees of
influence on consumers at each stage of this journey. This can be depicted by
the following exhibit (Exhibit 1):

Exhibit 1:Top 3 factors that influence whether a product is considered at each stage of the consumer decision
journey (based on a study by McKinsey)

CREST Feb 2011

COVER STORY- STRATEGY

The three forms of word-of-mouth marketing
Experiential
Experiential word of mouth is the most common and powerful form, typically
accounting for 50 to 80 percent of word-of-mouth activity in any given product
category. It results from a consumer’s direct experience with a product or service, largely when that experience deviates from what’s expected. Complaints
when airlines lose luggage or when flights get delayed are a classic example of
experiential word of mouth, which adversely affects brand sentiment and ultimately, equity, reducing receptiveness to traditional marketing. Positive word
of mouth, on the other hand, can generate a buzz for a product or service.

“„word-ofmouth equity‟
represents the
average sales
impact of a
brand message
multiplied by
the number of
word-of-mouth
messages.”

Consequential
Marketing activities also can trigger word of mouth. Consequential word of
mouth occurs when consumers directly exposed to traditional marketing campaigns pass on messages about them. The impact of those messages on consumers is often stronger than the direct effect of advertisements. Marketers
thus need to consider both the direct and the pass-on effects of word of mouth
when determining the message that goes in their advertisements.
Intentional
A less common form of word of mouth is intentional—for example, when marketers use celebrity endorsements to trigger positive buzz for product
launches. Few companies invest in generating intentional word of mouth,
partly because its effects are difficult to measure and because many marketers
are unsure if they can successfully execute intentional word-of-mouth campaigns.
Word-of-mouth equity
This article explores a way to calculate the ‘word-of-mouth equity’. It represents the average sales impact of a brand message multiplied by the number of word-of-mouth messages. By looking at the impact—as well as the
volume—of these messages, this metric lets a marketer accurately test their
effect on sales and market share for brands, individual campaigns, and companies as a whole (Exhibit 2). That impact—in other words, the ability of any one
word-of-mouth recommendation or dissuasion to change behavior—reflects
the ‘what, who and where’, i.e.:
(a) what is said,
(b) who says it, and
(c) where it is said
The impact also varies by product category.

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CREST Feb 2011

COVER STORY- STRATEGY

Exhibit 2:Measuring the impact of word of mouth marketing

What’s said is the primary driver of word-of-mouth impact. Across most product categories, the content of a message must address important product or
service features if it is to influence consumer decisions. In the mobile-phone
category, for example, design is more important than battery life. In skin care,
packaging and ingredients create more powerful word of mouth than do emotional messages about how a product makes people feel. Marketers tend to
build campaigns around emotional positioning, yet it has been found that consumers actually tend to talk—and generate buzz—about functional messages.
The second critical driver is the identity of the person who sends a message:
the word-of-mouth receiver must trust the sender and believe that he or she
really knows the product or service in question. ‘Influentials’- people who have
trust and influential power over consumers, typically generate three times
more word-of-mouth messages than ‘noninfluentials’ do, and each message
has four times more impact on a recipient’s purchasing decision. About 1 percent of these people are digital influentials—most notably, bloggers—with disproportionate power.

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Finally, the environment where word of mouth circulates is crucial to the
power of messages. Typically, messages passed within tight, trusted networks
have less reach but greater impact than those circulated through dispersed
communities—in part, because there’s usually a high correlation between people whose opinions we trust and the members of networks we most value.
That’s why old-fashioned kitchen table recommendations and their online
equivalents remain so important. After all, a person with 300 friends on Facebook may happily ignore the advice of 290 of them. It’s the small, close-knit
network of trusted friends that has the real influence.

CREST Feb 2011

COVER STORY- STRATEGY
Harnessing word of mouth
The starting point for managing word of mouth is understanding which dimensions of word-of-mouth equity are most important to a product category: the who,
the what, or the where. In skincare, for example, it’s the what; in automobile purchase, the who. Equipped with these insights, companies can then work on generating positive word of mouth, using the three forms of word-of-mouth marketing:
experiential, consequential, and intentional.

The science
behind „wordof-mouth equity‟ helps reveal how to
hone and deploy this strategy: allowing
marketers to
estimate the
tangible effect
word of mouth
has on brand
equity
and
sales.

a) Harnessing experiential word of mouth is fundamentally about providing customers with the opportunity to share positive experiences. Some companies, such
as Apple and Lego, build buzz around products before launch and work to have
early, highly influential adopters by involving consumers in product development,
supported by online communities. Consistently refreshing the product experience
also helps harness experiential word of mouth—consumers are more likely to talk
about a product early in its life cycle, which is why product launches or enhancements are so crucial to generating positive word of mouth.
b) Two things supercharge the creation of positive consequential word of mouth:
interactivity and creativity. One example of a company successfully harnessing
this power is the UK confectioner Cadbury, whose “Glass and a Half Full” advertising campaign used creative, thoughtful, and integrated online and traditional marketing to spur consumer interaction and sales.
The campaign began with a television commercial featuring a gorilla playing
drums to an iconic Phil Collins song. The bizarre juxtaposition was an immediate
hit. The concept so engaged consumers that they were willing to go online, view
the commercial, and create amateur versions of their own, triggering a torrent of
YouTube imitations. Within three months of the advertisement’s appearance, the
video had been viewed more than six million times online, year-on-year sales of
Cadbury’s Dairy Milk chocolate had increased by more than 9 percent, and the
brand’s positive perception among consumers had improved by about 20 percent.
c) Intentional word-of-mouth campaigns revolve around identifying’ influentials’
who become brand and product advocates. Ambitious marketers can use word-ofmouth equity insights to shift from consequential to intentional campaigning. Mobile carriers, for example, have granular customer data that can precisely locate
‘influentials’ who know the category, talk to many people, and provide them with
trusted opinions. That means messages can be directed at specific individuals who
are most likely to spread positive word of mouth through their social networks.
Marketers have always been aware of the effect of word of mouth, yet the science
behind ‘word-of-mouth equity’ helps reveal how to hone and deploy this strategy:
it shows which messages consumers are likely to pass on and the impact of those
messages, allowing marketers to estimate the tangible effect word of mouth has
on brand equity and sales. These insights are essential for companies that want to
harness the potential of word of mouth and to realize higher returns on their marketing investments.

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(With inputs from McKinsey Quarterly)

CREST Feb 2011

RESEARCH

Winning Approach to Change Management
Prof. John Kotter, the world-renowned change management guru in his famous book of
1995 titled 'Leading Change' introduced the popular 8-Step Model to successful change
management. Asha Tatapudi goes beyond this 8-step model and adds a 9th step to managing change.
As the maxim by the famous Greek Philosopher Heraclitus goes -â&#x20AC;&#x153;Change is the only Constantâ&#x20AC;?. In today's enterprises, 'Change' is an imminent driver not only emanating from the
Michael E. Porter's five forces from an external perspective but also from an internal perspective of an organization, where the change agenda could arise out of technology upgrades, system introduction, process improvements and above all bringing in behavioural
change.
As every enterprise needs to focus on both top-line growth and capability development as
two pivotal ends of the continuum, 'Change' is the only mantra to 'Sustainability'. Change
agenda in an organization could be micro-incremental, system wide or even organizationwide transformation.
However, what most organizations suffer is the obvious fear of failure of the change initiative. Most business leaders overly assume the ramifications of the impact of change and
are highly apprehensive about the change initiatives either at the initiation stage or when
they figure the smallest of waves of resistance to change. Especially, those business leaders, who prioritize growth to capability development, prefer to negotiate with the change
initiators rather than the resisting members to restore order or worst of all maintain
status-quo.
Therefore, the approach to change management is the key to the success of change
agenda. Prof. John Kotter, the world-renowned change management guru in his famous
book of 1995 titled 'Leading Change' introduced the popular 8-Step Model to successful
change management. These eight steps that are detailed below address the commonly
unique causes of failure of change management programs on the basis of years of his research which concluded that 70% of change initiatives fail because of the approach or
process of change management adopted.
The 8- Step Model (excerpts from Prof. John Kotter's book: 'Leading Change')
Step One: Create Urgency
For change to happen, it helps if the whole company really wants it. Develop a sense
of urgency around the need for change. This may help you spark the initial motivation to
get things moving.
Step Two: Form a Powerful Coalition
Convince people that change is necessary. This often takes strong leadership and visible
support from key people within your organization. Managing change isn't enough - you have to
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lead it.

CREST Feb 2011

RESEARCH

Step Three: Create a Vision for Change
When you first start thinking about change, there will probably be many great
ideas and solutions floating around. Link these concepts to an overall vision that people can grasp easily and remember.
Step Four: Communicate the Vision
What you do with your vision after you create it will determine your success.
Your message will probably have strong competition from other day-to-day communications within the company, so you need to communicate it frequently and powerfully,
and embed it within everything that you do.
Step Five: Remove Obstacles
If you follow these steps and reach this point in the change process, you've been
talking about your vision and building buy-in from all levels of the organization. Hopefully, your staff wants to get busy and achieve the benefits that you've been promoting.
Step Six: Create Short-term Wins
Nothing motivates more than success. Give your company a taste of victory early
in the change process. Within a short time frame (this could be a month or a year, depending on the type of change), you'll want to have results that your staff can see.
Without this, critics and negative thinkers might hurt your progress.
Step Seven: Build on the Change
Kotter argues that many change projects fail because victory is declared too
early. Real change runs deep. Quick wins are only the beginning of what needs to be
done to achieve long-term change.
Step Eight: Anchor the Changes in Corporate Culture
Finally, to make any change stick, it should become part of the core of your organization. Your corporate culture often determines what gets done, so the values behind your vision must show in day-to-day work.

Beyond the 8-Step Model - The critical 9th Step
Today, with the Indian Economy performing extraordinarily well, what with Indian entrepreneursâ&#x20AC;&#x2122; acquisition of every business opportunity and growing meteorically, the greatest bottleneck they have been confronting is their failure to develop the
organizational capability to deliver future growth.
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CREST Feb 2011

RESEARCH

â&#x20AC;&#x153;the first and
foremost step
that is essential
for the success
of
Change
Management is
the 'Leader's
Sponsorship of
Change Initiative'.â&#x20AC;?

Though, organizations identify certain change agenda they do not adopt a holistic
approach towards change management. Many enterprises have experienced that
despite religious practice of Prof. Kotter's 8-Steps of change management, the
change initiatives do not yet succeed in implementation and the scale of failures
have caused a kind of a phobia towards change. In these organizations, the major
common cause of failures is the underlying inappropriate assumption of the business leaders that driving change is the business of the staff functions and that it is
adequate if they are just kept informed about the change initiatives. The comfort
the business leaders draw through this approach is that they could avoid embarrassing confrontations with the resisting agents of change. Other business leaders
assume that their tacit support to the change initiatives of staff functions would
suffice and that they could also be spared from confrontations or embarrassment
of leading from the front. Thereby, on the shop floor, the organizational change
agenda ends up into a conflict of interests of the line and staff functions. Interestingly, the outcomes of both these approaches have met with failures despite advocacy of Prof. Kotter's 8- Step process.
The paramount cause of such failures is the fact that the change implementers who
turn out to become members resisting the change do not consider that change initiatives are the business agenda of the enterprise and that the business leaders expect the change to be implemented. This is more so, in family managed business
houses which are incidentally the major hi-growth companies in India, where the
family representatives are placed in key positions in every business unit / function / department to facilitate internal control.
Therefore, the Critical Success Factor (CSF) of successful change implementation is
not just the 8-steps of Prof. Kotter but the 'Leader's Sponsorship to the change
agenda'. The organization should campaign internally through powerful and impacting communication that the change agenda is also the business agenda of the
enterprise and that the business leaders actively sponsor the same. Only then
would the target employees get inspired and motivated to positively and actively
respond to the change programs.
Therefore, the first and foremost step that is essential for the success of Change
Management is the 'Leader's Sponsorship of Change Initiative'. In as much as,
this 9th Step would actually enable the success of Prof. Kotter's 8 Step Model of
change management.

Asha Tatapudi is a first year MBA (PMIR) student at XLRI Jamshedpur. She can be
reached at p10072@astra.xlri.ac.in

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CREST Feb 2011

CONSULTING NEWS

Accenture Most Prominent Consulting Brand?
A report by sourceforconsulting.com reveals that Accenture is the most prominent consulting
brand across the entire market of Tier 1 firms. The report was a result of survey of some of the
largest consulting buyers (procurement professionals only) which collectively spend around 2.5
billion pounds. They claim Accenture accounts for 20% of all choices by buyers. The reason for
Accenture’s success has been the fact that it
has been able to associate itself with more
than one line of service.
While this part of the report may not hold water with several who believe in the superiority of McKinsey or BCG, there is another interesting finding of the report. They have
tracked down the strongest firm-service associations:
- McKinsey & Strategy
- IBM and IT Consulting
- Accenture and Outsourcing
- PwC and Financing

The Battle of the Big Four
Narrowing down the focus to the Big Four
(Deloitte, PwC, Ernst & Young, KPMG) alone,
the Source report found that Deloitte is the
most prominent Big Four consulting brand.
The report says that perhaps the fact that
Deloitte was the only one not to divest its advisory practice in recent years is behind the
strength of its brand. The share of mind was
worked out at:
-Deloitte: 12%
-KPMG: 8%
-Ernst & Yong: 7%
-PwC: 6%
Although KPMG does not do very well here, if we narrow focus even further, then nearly twice
as many people in the public sector think of KPMG than any other firm. The report also found
that IBM and Capgemini Consulting also do well here, dominating associations with IT and outsourcing.

The Best Consulting Firm to Work for!
The Boston Consulting Group (BCG) has jumped six spots
to number two on FORTUNE's “100 Best Companies to
Work For” list this year, making it one of only two firms to
be ranked in the top dozen for six straight years. The consulting giant not only avoided layoffs in the downturn, but
hired its largest class of recruits ever in 2010.
BCG also achieved the top ranking as best “small” company
(defined as companies with less than 2,500 employees in
the United States) and was cited as one of the most diverse
overall, with 45 percent women and 27 percent minorities.
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The Editorial Team of Crest invites articles from readers for
publication in forthcoming issues. If you have articles/ experiences/ studies to share in the areas of consulting, entrepreneurship, research or strategy, please do send them
in to crest.xlri@gmail.com mentioning your name and institute name.